Suppose there are two identical firms in an industry with the following inverse demand curve: P=5000-20Q. Both firms hav

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answerhappygod
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Suppose there are two identical firms in an industry with the following inverse demand curve: P=5000-20Q. Both firms hav

Post by answerhappygod »

Suppose there are two identical firms in an industry with the
following inverse demand curve: P=5000-20Q. Both firms have
constant marginal costs equal to $500 per unit.
a. Assume that the two firms compete over quantities. Find the
output levels of each firm and their profit levels.
b. Assume that the two firms collude and evenly split the
profits. Find the output levels of each firm and their profit
levels.
c. Is the collusion agreement in part b stable? Explain your
answer
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